Canada's trade deficit shrinks by almost half

Europe, U.S., expected to drag on export growth

Energy products led the the growth in exports, which rose 1.9 per cent to $38 billion in September from the month earlier. (CBC)

Canada’s merchandise trade deficit shrank in September as exports recovered from a weak summer.

Statistics Canada says the deficit fell to $826 million, down from the $1.5 billion in August.

Exports rose 1.9 per cent to $38 billion, led by energy products, while imports held steady at $38.8 billion, with higher volumes offsetting lower prices.

Adjusting for inflation, exports rose 0.8 per cent and imports were up 1.5 per cent.

Exports of consumer goods remained weak, with auto parts down 0.7 per cent, electronics, electrical equipment and parts off 3.2 per cent and consumer goods lower by 2.9 per cent.

All these categories were down for the fourth straight month.

Exports to the United States grew 1.3 per cent to $27.8 billion on higher exports of aircraft and other transportation equipment and parts, while imports from America edged up 0.5 per cent to $24.3 billion.

Surplus with U.S. grows

The trade surplus with the United States rose to $3.5 billion from $3.2 billion a month earlier.

Exports to countries other than the United States increased 3.6 per cent to $10.2 billion, while imports slipped 0.8 per cent to $14.5 billion, meaning the trade deficit with those countries narrowed to $4.3 billion in September from $4.8 billion in August.

Exports were down eight per cent for the third quarter as a whole.

"This is not surprising given the economic woes experienced in the U.S. … Europe and China during the summer months," TD Economist Diana Petramala said in a note.

Petramala predicted exports would likely pick up some momentum heading into the final quarter of the year as manufacturing activity in the U.S. improves and American and U.S. auto sales remain healthy, a plus for Canadian auto producers.

"Auto exports may also gain some additional support as U.S. auto dealers need to replenish inventories destroyed by Hurricane Sandy," she said.

"Still, export growth is expected to remain lacklustre through the next six quarters as a Europe's recession continues and uncertainty over the fate of the U.S. fiscal cliff continues to hold economic activity back."

"We do expect a more full hearted pick up in export growth to begin in mid-2013 as the global outlook becomes more certain and the U.S. recovery gains steam," Petramala said.